14 DAY TRIAL // Despite the large number of consumer electronics appliances and computers that are currently shipping worldwide, the semiconductor industry has entered an unexpected slowdown. Recent reports emerging from Gartner, a market analysis company, claim that the slowdown is not likely to end anytime soon.
The same reports state that the globally sold semiconductors accounted for a total revenue of $273.9 billion last year, up a little above 3.8% from 2006. However, the increase in revenue is usually expected to reach double-digit margins, and the 3.8 percent should be regarded as a warning sign.
"Obviously, it's better than negative growth, but from a historic semiconductor view, it's not strong growth," said Gartner analyst Richard Gordon. "The market is in a low-single-digit growth phase. It's a concern. The high growth of the late '90s seems to be in the past now. I don't see anything on the horizon that will fuel growth in the near future. We're talking about long-term -- about forever," he continued.
According to the analyst, the industry is not in danger, but it lacks a major vector to give sales a boost. Gordon said that the semiconductor market expects volume growth, but semiconductors will face increased pressure in pricing, which would ultimately lead to a low-revenue growth.
The industry slowdown is likely to positively affect customers for a short while, as low-priced chips, passed as commodities, will account for inexpensive mobile phones and PC systems. However, the semiconductor manufacturers will be severely impacted by the shift in pricing, and many of them will be unable to survive.
While Intel and Samsung, the industry leaders, are strong enough to survive, the mid-tier sector will get the full blow.
"AMD is a tricky one. They've done quite a bit already in terms of sorting out their cost base. They have partnerships with the likes of IBM. They have had to reinvent themselves quite a bit. They're in a unique position because they're really only competing with Intel. I can't see anything happening there," concluded Gordon.